The Day at a Glance | June 19 2020

China will accelerate purchasing of US agricultural goods

After conversations had in Hawaii yesterday between officials from both countries, China committed itself to accelerate the purchase of agricultural goods such as soy, corn and ethanol in order to achieve the targets established in the “phase 1” of the trade agreement. Purchases have been delayed substantially because of the pandemic and only 13% of the objective had been met in the first 4 months of the year (-40% of what was imported in 2017, the base year for establishing goals), which is why in recent days the Chinese government has requested state companies to increase the purchase of these goods. Yesterday, US Secretary of State Mike Pompeo and the Chinese Foreign Minister Zhao Lijian committed to complying with targets in the meeting held in Hawaii. The is no further information regarding the issues discussed in the discrete meeting. This piece of news helps lessen fears of a rupture regarding trade relations due to a failure to comply with the agreement after strong criticism and an aggressive rhetoric on behalf of the US administration last month.

EU Leaders Summit

Today, a teleconference will be held between the 27 leaders of the European Union country members, and investors are focused on any announcement concerning the 750 billion euro fiscal package to reactivate the economy. The proposed stimulus plan has caused great divide inside the EU and a final amount must still be announced, as well as the form of access to resources. The European Commission trusted the implementation of a tax on transnational tech companies y Europe in order to respond to the fiscal costs of the stimulus package, something that could possibly no longer be viable after the US threatened to impose tariffs if Europe follows. Austria, Denmark, the Netherlands and Sweden have expressed their stance against shared indebtedness to support southern countries of the region, a position that Finland has recently adopted. Any decision approved must be taken by consensus and unanimously. European Central Bank Chairman Christine Lagarde has warned that the current calmness in financial markets considers greater fiscal actions by the government, including the EU, which is why if the stimulus is not approved, investor sentiment could overturn.

40% of land contracts suspended because of COVID-19: CNH

The National Hydrocarbons Commission (CNH, by its initials in Spanish) announced that during the bidding rounds for oil fields, close to 40% of all contracts given to private companies have requested suspending activities due to reasons of force majeure because of COVID-19. Out of the 45 existing licensing contracts, 18 of them have requested suspending activities due to the difficulties regarding the posting of workers and lack of inputs that he pandemic has caused. The projects in the Burgos Basin are the most affected, as activities have been postponed in Veracruz and Tamaulipas. This is not good news for the revival of the Mexican oil sector with PEMEX`s recent efforts to reduce the Exploration and Production budget in midst of the crisis in the industry. According to recent reports, PEMEX has requested its 25 prime contractors to delay settling invoices by half a year – for exploration, production and building infrastructure. The government and PEMEX both seek to avoid an expenditure of up to 70 billion pesos for contracts that must be paid in December – all of them part of the Adefas. The intention is to liberate capital flows in PEMEX`s budget in an environment characterized by the health crisis that affects not only profitability in the oil sector, but also in public finances.